What happens to my SIPP when I reach age 75? (2024)

FAQs

What happens to my SIPP when I reach age 75? ›

Any withdrawals are tax-free before age 75

Any money left in your SIPP when you die can normally be passed to your heirs free of inheritance tax. Any withdrawals they then make will usually be tax free if you died before you were 75. If you die when 75 or older, any withdrawals will be taxed as their income.

Regardless of whether the benefits are uncrystallised or in drawdown after age 75, the beneficiary will be subject to income tax on any benefits taken. Death after age 75 is not a relevant benefit crystallisation event as no tax-free benefits can be paid on death after age 75.

Increased Old Age Security pension at age 75

If you are turning 75 after July 1, 2022, you will receive the increase in the month following your 75th birthday. The 10% increase in the maximum OAS pension rate will not affect the calculation of your Guaranteed Income Supplement (GIS).

You are in control of what happens to your SIPP in the event of your death. You can decide who will inherit your SIPP - whether a family member, friend or a charity. You can also split your SIPP between various beneficiaries, in any proportion. Your pension does not normally form part of your estate.

Your beneficiaries will not be entitled to take tax-free cash after they have inherited it. However, if you are likely to take tax-free cash after the age of 75, check whether it is permitted by your pension provider. Some older pension contracts may not allow it.

SIPP contributions ARE allowable post age 75, but do not qualify for tax relief. The contributions must be for a reasonable amount or HMRC will see it as a tax dodge and refuse IHT relief.

What is the difference between a crystallised and an uncrystallised pension? An uncrystallised pension is one that hasn't been cashed in via drawdown or annuity. Crystallising your pension is the process of freeing up your investments and withdrawing your savings.

This is one of the key reasons many advisers usually look to gradually crystallise benefits over time. As always, client circ*mstances will dictate the right course of action. However, the IHT position appears to be a significant reason not to rush to crystallise all pensions now.

While a pension annuity offers a fixed monthly income, a lump sum can be used for a range of purposes, including for unexpected medical expenses. If you die early, you can potentially receive more money than you would with regular payments. If invested carefully, a lump sum could also offer a passive income.

What is rule of 75 for retirement? ›

Rule of 75

This rule states that you must be a minimum of 55 years of age and have a minimum of 10 years of full-time service without any intervening breaks in service*; if you meet both minimums, then the total of your age and years of service must equal at least 75. Age and years of service must be in whole years.

If your age at retirement and your total years of pensionable service added together equal at least 85 points, then you're entitled to an unreduced LAPP pension as early as your 55th birthday.

They are regulated by the FCA, and you're protected by the FSCS compensation scheme. However, their safety does also depend on the underlying investments you choose in your SIPP. Since you're in control of the investments, it's essential to assess the risks and make informed decisions.

With the HL SIPP, you have access to all the main retirement options, and can make withdrawals from age 55 (rising to 57 from 2028). The options include drawdown, lump sums and annuities. You can choose to take a flexible income as and when you need it.

Your investments pass to your beneficiaries

Any money or investments still in your SIPP when you die will normally pass to your beneficiaries. These are the people you've chosen using your account settings online.

Unless you're aged 55 and ready to choose a retirement option, you cannot withdraw from your SIPP. Take a look at your available retirement options to see how best to take money from your pension when you're ready.

When can you access your SIPP? The current SIPP withdrawal age rules mean that you have to be at least 55 to access this pension pot. However, this is due to change, and from April 2028 you'll need to be 57 before you can begin taking money out of your SIPP.

What happens if a SIPP goes bust? If your SIPP provider goes bust, the FSCS will step in to help. They'll either transfer your SIPP to a new provider or compensate you up to the £85,000 limit. Remember, this doesn't cover losses from poor investment performance.